Energy Bill Relief Scheme should not end with ‘cliff edge’

A quarter of small firms (24%) plan to “close, downsize, or radically change their business model” if the government reduces its support for them next year, the Federation of Small Businesses (FSB) has warned.

Currently the government’s Energy Bill Relief Scheme (EBRS), which supports all non-domestic energy customers with their bills, is due to end next March when ministers will aim to target support at the most vulnerable businesses.

In a report published on Wednesday (23 November), the FSB revealed the results of a survey of more than 1,000 of its members which asked how spiralling energy costs were having an impact.

While a quarter of small firms plan to either close or downsize if support is reduced, the survey found that this rises to 42% of those in the accommodation and food sector, 34% of wholesale and retail businesses and 29% in the manufacturing sector.

More than four in ten (44%) are considering raising prices to cope with soaring bills when the current support is due to end, while a third (30%) expect to cancel or scale down planned investments.

Yet one in five (18%) said they would need to keep their prices the same to take into account the fact their customers cannot afford further increases.

Well over half (63%) have seen an increase to their bills this year compared to last year, and 44% report a double, triple or even higher increase, with nearly one in five (19%) saying their bills had tripled or higher.

As a result of the survey, the FSB is calling on the government to continue support under the current EBRS to “avoid a cliff edge” next April.

It further wants the government to consider the size, not just sector or geography, of firms when determining which businesses are vulnerable and entitled to further help.

Government should additionally provide more long-term certainty so that small businesses can plan ahead and help firms invest in energy efficiency through incentives like voucher schemes.

FSB national chair Martin McTague said: “Our research indicates that small firms are being held back from investment and are at the brink of collapse because of sky-rocketing energy costs.

“It’d be a real shame and great loss to our economy if those who managed to get through the pandemic and this tough winter with government support end up closing their businesses because relief ends too sharply in April.

“Latest OECD forecasts suggest the UK economy will suffer the biggest hit from the energy crisis among G7 nations. But the tides can be turned if the government extends the period of energy support to struggling small businesses after the EBRS ends in April next year.”

He added: “To allow well-run businesses to go under would be a false economy as we enter a recession.”